Fiscal ending with clear signs of economic rebound: Pranab

Finance Minister Pranab Mukherjee said that financial year 2009-10 was ending with clear signs of economic rebound and the growth would rise to about 8.5 per cent in the next fiscal.

"It (fiscal 2009-10) began amidst the gloom of an economic downturn, but the year is ending with clear indicators of vibrant economic rebound," he told reporters after tabling the Economic Survey and report of the 13th Finance Commission in Parliament.

"Capturing this mood (of economic rebound), the Survey forecasts a GDP growth of 8.5 per cent +/- 0.25 per cent during 2010-11," the Minister said.

Following the impact of the global financial crisis, the economic growth rate slipped to 6.7 per cent during 2008-09 from over 9 per cent during the preceding three years.

Referring to the report of the Finance Commission, Mukherjee said, "We have accepted all the major recommendations of the Commission."

The Commission in its report on devolution of taxes, recommended that share of states in union taxes be raised to 32 per cent from 30.5 per cent now.

"The states will get 1.5 per cent (of the net proceeds of union taxes) more," Mukherjee said.

Recalling 5.8 per cent growth rate in the last quarter of the 2008-09, Mukherjee said, "We began the fiscal 2009-10...(with) a sense of despondency and gloom. Economy was having a downturn."

The economy situation has improved over the year, he said, adding, "We have come out and the Economic Survey has projected (that) for the year 2010-11 growth rate would be 8.5 per cent plus/minus 0.25 per cent.

"That means we began with a sense of uncertainty, and we are ending with sense of confidence", he said.

The Central Statistical Organisation (CSO) in its advance estimates of national income projected 7.2 per cent growth rate for the current fiscal, up from 6.7 per cent a year ago.

The economy in the second quarter of the current fiscal ending September 2009 recorded a growth rate of 7.9 per cent, much more than anticipated by any analyst or think tank.

Mukherjee further said that Survey, besides providing an economic analysis, has thrown up several new ideas and hoped that they would generate debate and discussion for future policy formulation.

"I want my ministry to be engaged in not just designing fiscal policy and recording economic performance but to be a laboratory of new ideas. It is in this spirit that the Economic Survey this year also provides new ideas and foundations for policy initiatives over the medium-term," he added.

Survey gung-ho on economy, rising prices worrying

Enthused by reforms and the strong fundamentals, the Economic Survey on Thursday predicted that India would bounce back to a high nine per cent growth in 2011-12 on the way to becoming world's fastest growing economy in four years.

The document, which assesses the state of the economy, warned that high food prices would rise further over next few months and criticised the food management policies that have led to "unacceptably" high prices of items like sugar.

Food inflation is at present hovering close to 18 per cent.

The pre-budget Survey (2009-10), presented by Finance Minister Pranab Mukherjee in Parliament, also recommended a "gradual rollback" of stimulus measures after assessing the impact on each sector.

Projecting the economic growth to touch up to 8.75 per cent in 2010-11 and nine per cent in the next year, the Survey said: "It is entirely possible for India to move into the rarefied domain of double digit growth and even attempt to don the mantle" of the fastest growing economy in the world within the next four years.

It, however, expressed concern over rising prices, saying that a major concern during 2009-10 was the emergence of high double digit food inflation.

High food prices may lead to overall higher inflation: Survey

The Economic Survey warned that overall prices would go up further in the next few months and partially blamed poor food management policies for double- digit food inflation.

"Since December 2009 there have been signs of these high food prices, together with the gradual hardening of non-administered fuel products prices, getting transmitted to other non-food items, thus creating some concerns about higher-than-anticipated generalised inflation over the next few months," Economic Survey, tabled in Parliament, said.

On a year-on-year basis, Wholesale Prices-based inflation in December 2009 was 7.3 per cent, while food inflation was 19.77 per cent.

Higher food prices were mainly because of supply-side constraints, compounded by poor monsoons in 2009.

"...in the case of sugar, delay in market release of imported raw sugar may have contributed to the overall uncertainty, thereby allowing prices to rise to unacceptably high levels in recent months," the Survey said.

It, however, observed that food prices may have reached their peak in December last year and are expected to moderate and also stabilise overall WPI on account of the likely impact of several measures taken by the government to contain price rise in recent months.

The government has taken a number of short-term and medium term measures to improve domestic availability of essential commodities and moderate inflation, it said.